Is my idea economically viable?

There will be some initial costs to consider when setting up my business. When first creating my online presence, I will set up a simple e-commerce website through a company such as wix.com. I feel that using this method is more reasonably priced than hiring a web developer or trying to create a website from scratch myself, something which I have no prior knowledge of.

I would like to use the ‘dropshipping’ process for my business, which is ‘a business model where you sell products online through a product supplier. The supplier then fulfils and ships the orders. You save time and focus on your store while your dropshipping supplier takes care of your customers’ orders.’ (Printful, n.d.). There are some print-on-demand companies that will be able to print my custom designs onto merchandise and then ship the product out for me, saving both money and time. Also, as the products are made to order, there is less wastage which is kinder to the environment.

As I don’t need to hold any physical stock, I also don’t need to include any initial costs for the products. Another cost-cutting factor is that I already have an iPad, graphics tablet and a laptop which has the correct software to produce the designs on.

I decided that utilising social media to advertise would be the best option. I’ll be able to tailor where I am advertising and who I am advertising to, hopefully reaching the right audience. I would hire a marketing company for initial assistance with this. After this has been set up in year one, it should prove easy enough from year two onwards to utilise social media to promote my business freely whilst reaching the same amount of potential people, possibly even more.   

I would also do some sponsored posts with twenty different influencers from various platforms who have a relevant audience for my business and, ideally, an audience of 200,000+ each. Most influencers generally charge between £100-£250 for one post. Hopefully, this will generate enough interest in my company in year one. I have also decided to invest the same amount of money into this in year two to ensure I am still reaching this same large audience. 

Overall, I’ve worked out that I will need £10,896 to set up my business. I plan on funding these costs through a crowdfunding site such as ‘Kickstarter.’ I discovered a similar kickstarter project whose business idea is to design and create custom 3D anime style figurines. Their goal was to raise $40,000 and they managed to get $40,848 pledged. This is more money than I need to raise however this demonstrates that raising money through a crowdfunding site for an idea similar to mine could be feasible.

https://www.kickstarter.com/projects/heroforge/chibify-customized-anime-collectibles?ref=discovery&term=custom%20character%20design

Also, as this initial set up period for my business won’t take long and when it’s up and running I wont need to put that many physical hours into the company because the vast majority of its process is outsourced, I decided to not factor in how much of my time will be used as it will be so little and will be done around my current retail job.

Next, I need to calculate a realistic profit or loss over the first two years of business. Firstly, I worked out how much to charge for each product. I considered the costs I needed to pay for each product on the outsourcing websites then made sure that I would make a good profit on each product, whilst still selling my products at a reasonable price.

I then attempted to work out my expected takings in years one and two. I first considered how large an audience that my social media adverts and sponsorships would reach (this would be the same amount in both years, possibly more in year two). Out of this amount, I then figured out how many would view my website. This is called a ‘click-through rate’ which ‘for social networks in the second quarter of 2020 reached 1.3%.’ (Statista, 2020). From this result, I worked out the conversion rate, which ‘is the percentage of visitors to your website that complete a desired goal … out of the total number of visitors’ (Wordstream, n.d.) In my instance, my ‘desired goal’ will be a purchase. The average for e-commerce is about 2%. Finally, I worked out the average price of my products and multiplied this by the expected amount of sales.

Overall, it appears that my expected takings for both year one and two would be £19,489.52 per annum. The average full time annual earning in the UK is £30,350 (Statista, 2020), which my final calculation is under. However, this is still enough to cover my personal expenses. Also, I plan on working at my current retail job for as long as possible and focus on this business on the side, due to the majority of my process being outsourced to third party companies, I will only have a small amount of time needed to be physically working and I am confident that this can easily be achieved around my current work hours. This second income will also act as a back up, just in case I end up earning less than the expected takings and, over time, when this business is taking nearer to the average full time earning amount, I will probably leave my retail job.

– 824 words

References:

Wix (2020) Wix premium plans. Available online: https://www.wix.com/upgrade/website [Accessed 01/11/2020].

Go Daddy (2020) Domain prices. Available online: https://uk.godaddy.com/offers/domains/cctld/com-or-co-uk/viral-offer?countryview=1&currencyType=GBP&isc=coukuk1&gclid=CjwKCAjw8-78BRA0EiwAFUw8LFSzepz_cfYDJsOkDX5SqORLdQwHj4wLzcMXTy1u5_fGo1SysNJxchoCg9wQAvD_BwE&gclsrc=aw.ds [Accessed 01/11/2020].

Printful (n.d.) What is dropshipping? Available online: https://www.printful.com/uk/drop-shipping [Accessed 02/11/2020].

Harrington, J (2019) Survey reveals how much influencers charge for posts. Available online: https://www.prweek.com/article/1579418/survey-reveals-influencers-charge-posts (Accessed 02/11/2020].

Bidvine (2020) How much do social media marketers cost? Available online: https://www.bidvine.com/social-media-marketing/price-guide [Accessed 01/11/2020].

Statista (2020) Social media advertising click-through rate (CTR) worldwide from 2nd quarter 2018 to 2nd quarter 2020. Available online: https://www.statista.com/statistics/872099/social-media-advertising-ctr/#:~:text=Recent%20evaluation%20of%20social%20media,of%202020%20reached%201.3%20percent. [Accessed 01/11/2020].

Wordstream (n.d.) Conversion rate: what is a conversion rate? Available online: https://www.wordstream.com/conversion-rate [Accessed 01/11/2020].

YouGov (2019) Conversion rates rise marginally to 1.7% in the first half of 2019. Available online: https://yougov.co.uk/topics/resources/articles-reports/2019/09/17/e-commerce-conversion-rates-rise-marginally-171-fi

Statista (2020) Median annual earnings for full-time employees in the united kingdom (uk) from 2000 to 2019. Available online: https://www.statista.com/statistics/1002964/average-full-time-annual-earnings-in-the-uk/ [Accessed 01/11/2020].

How much it will cost me for outsourcing each product prices found on these print-on-demand websites:

https://www.printful.com/custom-products

https://www.contrado.co.uk/design-your-own

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